The New Computerized CPA Exam

1. The New Computerized CPA Exam Presentation for Beta Alpha Psiby Teresa GordonOct. 27, 2004

2. Historic change! • Last paper and pencil exam was November 5-6, 2003 • CBT launched on April 5, 2004

3. Reasons for change • Based on “practice analysis” • Entry-level accountants need to be able to examine a business situation and identify what, if any, accounting issues or auditing or business risks might be involved • Need fundamental professional knowledge • But also need the ability to • Analyze • Organize • Communicate

4. The Old Exam • The pencil & paper exam: • 15.5 hours long over a two-day period • Given twice a year in May and November • 4-function calculator provided • You could “condition” by passing two parts and getting a minimum on the remaining parts

5. The New CPA Exam • Computer-based • On-screen 4-function calculator • Taken at Prometrics testing center • Can be taken one section at a time • Tests higher level skills • Includes simulations in which candidates will use databases, spreadsheets, and basic word-processing • New content on general business knowledge

6. Computer Based Exam Analysis Judgment Communication Research Understanding Pencil Based Exam Understanding Application Evaluation Comparison of SKILL Definitions

7. 1 2 4 1 2 3 4 Jan. Feb. April May July Aug. Oct. Nov. CPA EXAM – When Can You Take It? Windows – 2 months every Quarter OpenClosed April – May June July – August September October – November December January – February March

8. Impact on Candidates • Candidates have more flexibility in terms of scheduling to test • Candidates can focus study on a section(s) as they feel comfortable • Can take one or more sections within a month, window or longer period • Take it anywhere • However, you apply for the exam in the state in which you want to be certified

9. Score Reporting • Initially, advisory grades reported to State Boards at the end of each window • State Boards of Accountancy distribute grades • Frequency of release to State Boards of Accountancy should increase within a year • AICPA wanted Pass/Fail Scores Only • Some States pass/fail • Some states issue scores zero to 99 • Grades haven’t been sent out promptly enough so far – hopefully that will improve over time

10. Complete One Part at a Time • Must complete all 4 sections within 18 Month Rolling Time Period • If you fail a part in one of the testing windows, you can’t take that part again during that window

11. Granting of Credit • Each section can be taken individually and in any order • Credit for a passed section(s) retained for 18 months • No minimum score requirement for failed sections

12. 1 2 4 1 2 3 4 Jan. Feb. April May July Aug. Oct. Nov. Completing the Exam: • Testing Windows – Is 18 months enough time to complete?

13. 2004 Scores Released • April 5 – May 31, 2004 Results are In! • First testing window 22,601 parts taken • Average pass rate 45% • Pencil & Paper Exam was about 33% per part • Pass rate info for July/August testing window not yet available, no information yet on pass rates for different parts • Candidate Procrastination • 57,000 sections approved, but not yet scheduled • Why is this happening?

14. Content of the Exam 4 Parts

15. EXAM Sections • The computer-based exam: • Auditing and Attestation (4½ hours) • Financial Accounting & Reporting (4 hours) • Regulation (3 hours) • Business Environment & Concepts (2½ hours) • A total of 14 hours

16. Audit & Attestation • GAAS • Attestation Standards • SSARS • Yellow Book (governmental auditing) • Assurance Services • Integrated with other sections • Sarbanes-Oxley – not until middle of 2005 • Utilize database: SAS Professional Standards

17. Financial Accounting & Reporting • 80% Financial • 20% Government/Not-for-Profit (All multiple-choice – plan to add to simulations in 2005) • GAAP • OCBOA • GASB/FASAB • SOPs • Use FARS data base

18. Regulation of Business • Law 40% • Plan to add simulation in 2006 • Business Law except Business Organizations • Heavy emphasis on: • Ethics • Professional Responsibilities • Tax 60% • Prepare tax return schedules • Tax database • Code, Regulations and Publication 17

19. General Business Environment & Concepts • Content formerly tested in pencil & paper exam – 30% OLD • Measurement (Managerial) 10% • Business Structure 20% • General Business Knowledge – 70% NEW • Information Technology 20% • Economic Concepts 10% • Corporate Financial Management 25% • Cost Measurement and Pricing 15% • Lots on transfer pricing

20. COMPETENCIES Tested 2004 • Test Higher Level of Cognitive Skills • Integration of Knowledge • Communication Skills • Analytical Skills • Use “EXCEL-like” spreadsheet • General Business Knowledge • Data Base Research Skills

21. Registration • National Candidate Database • New system created by NASBA • Designed to track each candidate with unique national ID • All candidate data maintained within the NCD • Ensures only eligible candidates test at appropriate times • Secures candidate data, including grades

22. Applying to take the exam • You will make application to a particular state and pay your fees • Eligible candidates will receive a Authorization to Test and Notification to Schedule allowing them to register to sit for exam section(s)

23. Registration Problems • NASBA payment coupon – system improved with second window • Some state boards take 6 – 8 weeks to issue an “Authorization to Test” (ATT) • Scores received too late to know if one section is passed before the candidate registers for the next exam section

24. Taking the Exam Upon completion of check-in, the candidate: • is seated at a designated workstation • begins the exam after proctor launches the session • is monitored by a Test Center Administrator • is video taped

25. At Completion Upon completion of the examination, the candidate: • signs-out • collects his/her belongings • turns in scratch paper • is given a Post Exam Information sheet

26. Problems so far … • Forgetting to bring proper ID • Best to schedule early to get day and time you prefer • Candidates report few problems with Prometric in either scheduling or exam proctoring

27. Examination Format 80% Multiple Choice 20% Simulations

28. Examination Format - Multiple-Choice • MC – 3 Testlets • MC 24 - 30 questions each • Across Each Content Specification Area • 4 options MC, radio bullet form

29. Multiple Choice Questions

30. Not the same questions for everyone • Your particular questions will be drawn from a pool of questions • Based on content specifications • Based on “psychometric” specifications • Difficulty level • You will not be allowed to change your answers after you leave each “testlet”

31. Pretesting • 20% of the questions • Not counted in the candidate’s final score

32. Candidate Problems so Far • Identical/similar questions appearing more than once • Time is very tight – esp. for financial accounting and reporting section • No time to take a break • No clock – just a notation on how much total time you have left • Practice with on-screen calculator • Use ten-key pad – much faster than pointing to the keys • No commas on calculator

33. Examination Format - Simulations • Case-based simulations (25-45 minutes each) • test integrated knowledge • more closely replicate real world • assess research, written communication and other skills • Initially, the simulations will be limited to the following 3 parts • Auditing and Attestation • Financial Accounting & Reporting • Regulation

34. AICPA Plans • Planning for two full simulation sections in each part of the exam by end of 2005 • Simulation Question Types • Drop-down selection lists • Check boxes • Spread sheets (enter, drag & drop, formula) • Written communication • Research (access to professional literature and other information)

35. Simulations

36. Constant Tabs Directions Resource Two Types of Tabs Informational Work Tabs (pencil icon) Gradable concepts Moving Around in Simulations • Candidates had trouble with some of the simulations • Split screen and Minimize did NOT work like Windows • Caused some “freeze screens” which took up time which you don’t get back • Be sure to check ALL the tabs since necessary facts may be under “resources” tab

37. Simulation Tools • Spreadsheet tool – it is not really Excel! • Word processing tool • Cut, copy and paste • Spellchecker • Four-function calculator • Access to professional literature and other resources

38. Simulations

39. Simulations

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44. Simulations

45. Candidate Problems so far • EXCEL Spreadsheet “like” Activities continue to give candidate problems • Formulas don’t work exactly like current versions of Excel • Does not have “wizards” to help you write formulas • Does not have most functions like present value functions • You still have to use “time value of money tables” to do present value problems • Exam typos $4,6005

46. Authoritative Literature • All simulations will include a research component • Candidates will be required to access authoritative literature: • FASB – Current Text and Original Pronouncements • AICPA Professional Standards • Tax Database • Code, Regulations and Publication 17

47. Research • FARS for Financial Accounting & Reporting and AICPA Professional Standards for Audit free for 6 months – students must register on www.cpa-exam.org after they obtain an exam ID (NTS) • Tax for Regulation – what to use to practice? • None for Business Concepts – planned for early 2006; Could begin “Communications” as early as second quarter of 2005

48. Authoritative Literature

49. Authoritative Literature

50. Authoritative Literature